Philip Falcone, chairman and chief executive officer of Harbinger Group Inc., will be banned from working in the financial industry for five years as part of a settlement he reached with the SEC.

Falcone allegedly took a $113 million “loan” from Harbinger when investors were barred from withdrawals. The money was to be used to pay Falcone’s taxes, according to the government. No matter, it was a fairly obvious violation of disclosure and clearly unethical.

In addition to the admission of wrongdoing — which opens Falcone and potentially Harbinger to possible lawsuits by investors — Falcone agreed to pay $6.5 million in disgorgement, $1 million in interest and a $4 million penalty.

For a man of Falcone’s means that’s fairly weak in terms of fines and penalties. Lawsuits may hurt his pocketbook more. But the third leg of the settlement, Falcone is barred from work in the securities industry for five years, is stinging. Wall Street princes don’t do well with exile. See Dick Fuld.

Upon return (and yes, odds are he will, see Frank Quattrone and more), Falcone will have a fresh start if he wants it. You don’t run what was once a $26 billion investment fund without making enough friends to get you back in the game. Unlike Fuld, Falcone’s alleged wrongdoings didn’t help bring down the financial system — it just may have ripped off a few clients.

It’s that possibility that will make this settlement tough to take for fair market enthusiasts. Until penalties are harsh enough, it’s hard to believe future Falcones will check their behavior. Falcone, it can be guessed, knows it.

“I believe putting these issues behind me now is the best course of action for me and our investors,” he said in a statement.

In other words Falcone isn’t getting away with it, but in time, he can come back.

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